ELBERT COUNTY BOARD OF EDUCATION ELBERTON, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS Russell W. Hinton State Auditor ELBERT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION- SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET ASSETS 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS 5 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 6 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 7 G STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS 8 H STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS 9 I NOTES TO THE BASIC FINANCIAL STATEMENTS 10 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND 25 ELBERT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 2 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 26 3 SCHEDULE OF STATE REVENUE 27 4 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM 29 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS ELBERT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTIONV MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 29, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Elbert County Board of Education INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION - SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Ladies and Gentlemen: We have audited the accompanying financial statements ofthe governmental activities, each major fund, and the aggregate remaining fund information (Exhibits A through I) of the Elbert County Board of Education, as of and for the year ended June 30, 2006, which collectively comprise the Board's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Elbert County Board of Education's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opm10ns. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Elbert County Board of Education, as of June 30, 2006, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. 2006ARL-11 In accordance with Government Auditing Standards, we have also issued our report dated January 29, 2007, on our consideration of the Elbert County Board of Education's internal control over financial reporting and our tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters. The purpose ofthat report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Management's Discussion and Analysis and the Schedule ofRevenues, Expenditures and Changes in Fund Balances - Budget and Actual, as presented on pages i through vii and page 25 respectively, are not a required part ofthe basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthe required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Elbert County Board of Education's basic financial statements. The accompanying supplementary information which consist of Schedules 2 through 4, which includes the Schedule of Expenditures of Federal Awards as required by U. S. Office of Management and Budget Circular A-133, Audits ofStates, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, ~,.~~~ ~Jsell W. Hinton, CPA, CGFM State Auditor RWH:gp 2006ARL-1 l ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Introduction Our discussion and analysis of the Elbert County School District's financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2006. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School District's financial performance. Financial Highlights Key financial highlights for fiscal year 2006 are as follows: On the District-wide financial statements, the assets of the School District exceeded liabilities by $19.3 million. Of this amount, the School District has a balance of $0.3 million in unrestricted funds. The School District had $31.9 million in expenses relating to governmental activities; only $22.2 million of these expenses are offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $12.6 million were adequate to provide for these programs with the result that Net Assets were increased by $2.9 million. As stated above, general revenues accounted for $12.6 million or 36.3% of all revenues totaling $34.8 million. Program specific revenues in the form of charges for services, grants and contributions accounted for the rest. Overview of the Financial Statements This annual report consists of three parts; management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the District-wide and fund financial statements. The District-wide financial statements include the Statement of Net Assets and Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The Fiduciary Funds statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. The fund financial statements reflect the School District's most significant funds. In the case of the Elbert County ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 School District, the General Fund, District-wide Capital Projects Fund, and Debt Service Fund are the most significant funds. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. District-wide Statements The District-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the District-wide financial statements, a reader might ask the question, are we in a better financial position than last year? The Statement of Net Assets and the Statement of Activities provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net assets and any changes in those assets. The change in net assets is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors. The Statement of Net Assets and the Statement of Activities reflects the School District's governmental activities. Fund Financial Statements The School District uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide detail information about only the School District's significant or major funds. Governmental Funds: Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at yearend available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds are reconciled to the financial statements. 11 ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. Financial Analysis of the School District as a Whole Recall that the Statement of Net Assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net assets for this fiscal year as compared to the prior fiscal year. Table 1 Net Assets Governmental Activities Fiscal Fiscal Year 2006 Year 2005 Assets Current and Other Assets Capital Assets, Net $ 6,265,770 $ 5,508,672 21,525,142 17,238,239 Total Assets $ 27,790,912 $ 22,746,911 Liabilities Current and Other Liabilities Long-Term Liabilities $ 3,527,414 $ 3,584,043 4,911,394 6,644,596 Total Liabilities $ 8,438,808 $ 10,228,639 Net Assets Invested in Capital Assets, Net of Related Debt Restricted Unrestricted (Deficit) $ 16,613,748 2,407,851 330,505 $ 10,943,643 2,174,296 -599,667 Total Net Assets $ 19,352,104 $ 12,518,272 Table 2 shows the Changes in Net Assets for this fiscal year as compared to the prior fiscal year. iii ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 2 Change in Net Assets Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Governmental Activities Fiscal Fiscal Year 2006 Year 2005 $ 1,423,161 19,862,171 889,358 $ 1,637,381 19,195,979 95,542 Total Program Revenues $ 22,174,690 $ 20,928,902 General Revenues: Taxes Property Taxes For Maintenance and Operations $ 7,623,392 $ 7,028,813 Railroad Cars 18,839 20,957 Sales Taxes Special Purpose Local Option Sales Tax For Debt Service 2,056,773 2,068,484 Intangible Recording Tax 137,267 93,595 Real Estate 145,686 44,687 Grants and Contributions not Restricted to Specific Programs 2,431,736 2,307,020 Investment Earnings 72,899 23,993 Miscellaneous 156,633 131,942 Special Items Sale of Land 27,000 Total General Revenues and Special Items $ 12,643,225 $ 11,746,491 Total Revenues $ 34,817,915 $ 32,675,393 Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt $ 20,484,387 1,011,327 1,215,567 718,312 365,809 1,978,928 213,653 1,643,013 1,301,344 114,808 588,065 14,967 1,912,999 324,327 $ 20,001,481 901,642 805,130 711,361 391,884 1,782,508 234,922 1,779,336 1,335,812 99,906 387,643 1,963,962 403,265 Total Expenses $ 31,887,506 $ 30,798,852 Increase in Net Assets $ 2,930,409 $ 1,876,541 iv ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Governmental Activities The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year. Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year2006 Year 2005 Net Cost of Services Fiscal Fiscal Year2006 Year2005 Instruction $ 20,484,387 $ 20,001,481 $ Support Services Pupil Services 1,011,327 901,642 Improvement oflnstructional Services 1,215,567 805,130 Educational Media Services 718,312 711,361 General Administration 365,809 391,884 School Administration 1,978,928 1,782,508 Business Administration 213,653 234,922 Maintenance and Operation of Plant 1,643,013 1,779,336 Student Transportation Services 1,301,344 1,335,812 Other Support Services 114,808 99,906 Operations of Non-Instructional Services Enterprise Operations 588,065 387,643 Community Services 14,967 Food Services 1,912,999 1,963,962 Interest on Short-Term and Long-Term Debt 324,327 403,265 5,718,840 $ 568,430 578,472 375,446 -202,989 1,057,738 213,653 696,018 559,173 73,422 -217,096 14,967 -47,585 324,327 6,664,924 530,277 454,121 386,898 -283,745 809,864 -236,180 838,952 642,247 -147,802 -208,237 15,366 403,265 Total Expenses $ 31,887.506 $ 30,798.852 $ 9,712,816 $ 9.869,950 Financial Analysis of the School District's Funds The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $36.4 million and total expenditures and other financing uses of $3 5.8 million. General Fund Budgeting Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2006, the School District amended its general fund budget as needed. V ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 For the General Fund, the final actual revenues and other financing sources of $32.7 million exceeded the original budgeted amounts of $31.1 million by $1.6 million. This difference (final actual vs. original budget) was due primarily to Miscellaneous Revenues larger than the original projected amounts and Other Financing Sources that were not budgeted. The actual revenues and other financing sources of $32.7 million exceeded the final budgeted amounts of $28.7 million by $4.0 million. The final actual expenditures and other financing uses of $33.9 million exceeded the original budgeted amount of $31.2 million by $2.7 million. This difference was primarily due to grants expenditures that were not considered in the budget process. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2006, the School District had $21.5 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation as compared to the prior fiscal year. Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2005 Year 2006 (Restated) Land Buildings and Improvements Equipment Land Improvements $ 1,036,946 18,072,901 2,316,597 98.698 $ 1,036,946 18,765,750 1,234,750 104.216 Total $ 2125252142 $ 21 2141li62 Debt At fiscal year ended June 30, 2006, the School District had $3.6 million in bonds outstanding, and $1.3 million in other long-term debt. Table 5 summarizes the School District's debt for general obligation bonds and capital leases outstanding. Vl ELBERT COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2006 Table 5 Debt at June 30 Governmental Activities Fiscal Fiscal Year 2006 Year 2005 Bonds Payable Capital Leases $ 3,610,000 $ 5,280,000 1,301,394 1,364.596 Total $ 4,911,394 $ 6,644,596 Current Issues Currently known facts, decisions or conditions that are expected to have a significant effect on financial positions or results of operations. State Funding Reductions - The State of Georgia has experienced significant reductions in state revenues and has passed a portion of those reductions to school districts by implementing "Austerity" and other cuts. For the fiscal year ended June 30, 2006, the "Austerity" reduction for the School District was $890,097. This is in addition to other smaller cuts in funding for media, transportation and staff development. These funding reductions have resulted in the School District reducing its certified and classified staff during the fiscal years ending June 30, 2004, June 30, 2005, and June 30, 2006. Deficit in Capital Projects Fund - At June 30, 2005, the School District had a deficit of ($1,550,019) in its Capital Projects Fund. The School District transferred sufficient funds from the General Fund to eliminate the Capital Projects Fund Deficit as of June 30, 2006. Deficit Net Assets in Unrestricted Fund - At June 30, 2005, the School District had a deficit of ($599,667) in Net Assets. The School District has made significant progress and as of June 30, 2006, the School District had a balance of $330,505 in Unrestricted Net Assets. Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mr. Phil Pitts, MBA CPA, Finance Director at (706) 213-4052 or via mail @ Elbert County School District, 50 Laurel Drive, Elberton, Georgia 30635. You may also email your question to Mr. Pitts at ppitts@elbert.k12.ga.us. vu ELBERT COUNTY BOARD OF EDUCATION ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF NET ASSETS JUNE 30, 2006 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets Land Land Improvements Buildings Equipment Less: Accumulated Depreciation Total Assets LIABILITIES Accounts Payable Salaries Payable Deposits and Deferred Revenues Long-Term Liabilities Due Within One Year Due in More Than One Year Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Continuation of Federal Programs Debt Service Unrestricted Total Net Assets Total Liabilities and Net Assets EXHIBIT "A" GOVERNMENTAL ACTIVITIES $ 1,363,857 1,789,079 858,552 2,073,519 114,200 12,416 54,147 1,036,946 2,311,219 25,770,381 8,305,343 -15,898,747 $ ===2=7,=79=0=,9=1=2= $ 845,013 2,667,756 14,645 2,080,365 2,831,029 $ 8,438 808 $ 16,613,748 256,496 2,151,355 330,505 $ 19,352,104 $ ===2=7=7,=9=0,=91=2= The notes to the basic financial statements are an integral part of this statement. -1- ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2006 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Intangible Recording Tax Real Estate Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Assets Net Assets - Beginning of Year (Restated) EXPENSES CHARGES FOR SERVICES $ 20,484,387 $ 1,011,327 1,215,567 718,312 365,809 1,978,928 213,653 1,643,013 1,301,344 114,808 588,065 14,967 1,912,999 324 327 $====3=1=,8=8=7,=50=6= $ 27,026 805,161 590,974 1 423 161 Net Assets - End of Year The notes to the basic financial statements are an integral part of this statement. -2 - EXHIBIT"B" PROGRAM REVENUES OPERATING CAPITAL GRANTS AND GRANTS AND CONTRIBUTIONS CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET ASSETS $ 13,976,115 $ 442,897 637,095 342,866 568,798 918,440 932,470 640,856 41,386 1,361,248 $ 19,862,171 $ 762,406 $ 2,750 14,525 101,315 8,362 889,358 $ -5,718,840 -568,430 -578,472 -375,446 202,989 -1,057,738 -213,653 -696,018 -559,173 -73,422 217,096 -14,967 47,585 -324,327 -9,712,816 $ 7,623,392 18,839 2,056,773 137,267 145,686 2,431,736 72,899 156 633 $ 12,643,225 $ 2,930,409 16,421,695 $ =====19=,3=5=2=1'=04= -3- ELBERT COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 EXHIBIT"C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Total Assets LIABILITIES AND FUND BALANCES LIABILITIES Cash Overdraft Accounts Payable Salaries Payable Deposits and Deferred Revenues Total Liabilities FUND BALANCES Reserved for: Continuation of Federal Programs Debi Service Inventories Unreserved Undesignated Reported in: General Fund Capital Projects Total Fund Balances Total Liabilities and Fund Balances GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,364,185 $ 15,358 229,950 2,073,519 114,200 12,416 54147 0 $ 1,364,185 $ 1,773,721 1,789,079 377,962 607,912 2,073,519 114,200 12,416 54147 $ 3,863,775 $ 0 $ 6,015,458 $ 845,013 2,667,756 14 645 $ 3,527,414 $ 328 $ 328 845,013 2,667,756 14 645 $ 328 $ 3,527,742 $ 202,349 54,147 79,865 $ $ 336,361 $ $ 3,863,775 $ $ 202,349 $ 2,151,355 2,151,355 54,147 79,865 0 0 0 $ 2,151,355 $ 2,487,716 0 $ 2,151,683 $ ==6=,0=1=5,=45=8= The notes to the basic financial statements are an integral part of this statement. -4- ELBERT COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 EXHIBIT"D" Total Fund Balances - Governmental Funds (Exhibit "C") Amounts reported for Governmental Activities in the Statement of Net Assets are different because: Capital Assets used in Governmental Activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land Land Improvements Buildings Equipment Accumulated Depreciation Total Capital Assets Some of the School District's property tax revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures. Long-Term Liabilities, including Bonds Payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consist of: Bonds Payable Capital Leases Total Long-Term Liabilities $ 2,487,716 $ 1,036,946 2,311,219 25,770,381 8,305,343 -15,898,747 21,525,142 250,640 $ -3,610,000 -1 301 394 -4 911 394 Net Assets of Governmental Activities (Exhibit "A") $ 19,352,104 The notes to the basic financial statements are an integral part of this statement. -5- ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 EXHIBIT"E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Enterprise Operations Community Services Food Services Operation Debt Services Principal Interest Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES} Capital Leases Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Fund Balances - Ending GENERAL FUND DISTRICTWIDE CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 7,428,411 282,953 18,658,004 3,737,218 1,423,161 22,274 944,676 $ $ 32,496,697 $ $ 7,428,411 $ 2,056,773 2,339,726 18,658,004 3,737,218 1,423,161 50,625 72,899 0 944 676 0 $ 2,107,398 $ 34,604,095 $ 19,723,365 1,011,327 1,219,203 718,312 365,809 1,982,203 213,653 2,722,888 1,369,597 114,808 588,065 14,967 1,902,462 326,163 65,607 $ $ 32,338,429 $ $ 158,268 $ $ 19,723,365 1,011,327 1,219,203 718,312 365,809 1,982,203 213,653 2,722,888 1,369,597 114,808 588,065 14,967 1,902,462 $ 1,670,000 0 258,720 1,996,163 324,327 0 $ 1,928,720 $ 34,267,149 0 $ 178,678 $ 336,946 $ 262,961 $ 1,550,019 -1,550,019 $ 262,961 1,550,019 -1,550,019 $ -1,287,058 $ 1,550,019 $ 262,961 $ -1,128,790 $ 1,550,019 $ 178,678 $ 599,907 1,465,151 -1,550,019 1,972,677 1,887,809 $ 336,361 $====0= $ 2,151,355 $ 2,487,716 The notes to the basic financial statements are an integral part of this statement. -6- ELBERT COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2006 EXHIBIT "F" Total Net Change in Fund Balances - Governmental Funds (Exhibit "E") Amounts reported for Governmental Activities in the Statement of Activities are different because: Capital Outlays are reported as expenditures in Governmental Funds. However, in the Statement of Activities, the cost of Capital Assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital Outlay Depreciation Expense Excess of Capital Outlay over Depreciation Expense Because some property taxes will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. Some of the Capital Assets acquired this year were financed with capital leases. In Governmental Funds, a capital lease arrangement is considered a source of financing, but in the Statement of Net Assets, the lease obligation is reported as a Long-Term Liability. Repayment of Long-Term Debt is reported as an expenditure in Governmental Funds, but the repayment reduces Long-Term Liabilities in the Statement of Net Assets. In the current year, these amounts consist of: Bond Principal Retirements Capital Lease Payments Total Long-Term Debt Repayments $ 599,907 $ 1,376,516 -993,036 383,480 213,820 -262,961 $ 1,670,000 326,163 1,996,163 Change in Net Assets of Governmental Activities (Exhibit "B") $ ==2,=93=0=!=,4=0=9 The notes to the basic financial statements are an integral part of this statement. -7- ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006 EXHIBIT"G" ASSETS Cash and Cash Equivalents Investments Certificate of Deposit Total Assets LIABILITIES Funds Held for Others NET ASSETS Held in Trust for Private Purposes Total Liabilities and Net Assets PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 4,551 $ 38,828 33140 $ 37 691 $ ===3=8,=82=8= $ 38,828 $ _ _ _3~7~69_1_ $ 37 691 $ =====3=8=,8=2=8= The notes to the basic financial statements are an integral part of this statement. -8 - ELBERT COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2006 ADDITIONS Contributions Donors Investment Earnings Interest Total Additions DEDUCTIONS Scholarships Change in Net Assets Net Assets - Beginning Net Assets - Ending EXHIBIT"H" PRIVATE PURPOSE TRUSTS $ 5,000 1,162 $ 6,162 0 $ 6,162 31,529 $ ======3=7=6=9=1= The notes to the basic financial statements are an integral part of this statement. -9- ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Elbert County Board ofEducation (School District) was established under the laws ofthe State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Elbert County Board of Education. District-wide Statements: The Statement ofNet Assets and the Statement ofActivities display information about the financial activities ofthe overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support ofthe School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients ofgoods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting ofinternal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 10 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources ofthe School District, except those resources required to be accounted for in another fund. District-wide Capital Projects Fund accounts for financial resources to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (sales) legally restricted for the payment ofgeneral longterm principal, interest and paying agent's fees. The School District reports the following fiduciary fund types: Private Purpose Trust funds report trust arrangements under which principal and income may be expended to provide scholarships for selected students. Agency funds account for assets held by the School District as an agent for various principals' accounts that include clubs, awards and other school organizations. BASIS OF ACCOUNTING The basis ofaccounting determines when transactions are reported on the financial statements. The District-wide governmental and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless ofwhen the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. - 11 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds ofgeneral long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination ofspecific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. RESTATEMENT OF PRIOR YEAR NET ASSETS For fiscal year 2006, the School District restated various Capital Assets due to errors and omissions. The School District increased, net of accumulated depreciation, buildings and improvements and equipment, $3,902,147 and $1,277, respectively. Additionally, the School District decreased, net of accumulated depreciation, land improvements by $1. The result is an increase in Net Assets at July 1, 2005, of $3,903,423. This change is in accordance with generally accepted accounting principles. CASH AND CASH EQUIVALENTS COMPOSITION OF DEPOSITS Cash and cash equivalents consist ofcash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorize the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. INVESTMENTS COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates ofdeposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase ofone year or less are reported at amortized cost. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code ofGeorgia Annotated Section 36-83-4 authorizes the School District to invest its funds. In selecting among - 12 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES options for investment or among institutional bids for deposits, the highest rate ofreturn shall be the objective, given equivalent conditions of safety and liquidity. Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime banker's acceptances, (6) The Local Government Investment Pool administered by the State of Georgia, Office of Treasury and Fiscal Services, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. PROPERTY TAXES The Elbert County Board ofCommissioners fixed the property tax levy for the 2005 tax digest year (calendar year) on August 3, 2005 (levy date). Taxes were due on November 15, 2005 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2005 tax digest are reported as revenue in the governmental funds for fiscal year 2006. The Elbert County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% oftaxes - 13 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2006, for maintenance and operations amounted to $7,409,572. The tax millage rate levied for the 2005 tax year (calendar year) for the Elbert County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 16.651 mills SALES TAXES Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $2,056,773 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. INVENTORIES FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation ofmeals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. CAPITAL ASSETS Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: - 14 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment $ 1 NIA $ 5,000 20 years $ 5,000 50 years $ 5,000 5 to 25 years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. GENERAL OBLIGATION BONDS The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Assets. DEFICIT FUND BALANCES The fund reporting a deficit fund balance at June 30, 2006, is as follows: Fund Type/Fund Name Deficit Balance Governmental General Fund (Fund 100) $ 176,902 The School District completely eliminated the deficit in the Capital Projects Fund during fiscal year 2006 through a transfer oflocal funds from the general fund. Because this transfer was significant, it created a deficit in the general fund which the School District made progress in reducing during fiscal year 2006. The School District Board Members are closely monitoring expenditures in an effort to have this deficit completely eliminated by fiscal year 2008. Note 3: DEPOSITS AND INVESTMENTS COLLATERALIZATION OF DEPOSITS Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate ofthe face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent ofthe public funds being secured after the deduction ofthe amount ofdeposit insurance. - 15 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS Ifa depository elects the pooled method (OCGA 45-8-13 .1) the aggregate ofthe market value ofthe securities pledged to secure a pool ofpublic funds shall be not less than 110 percent ofthe daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. CATEGORIZATION OF DEPOSITS At June 30, 2006, the bank balances were $1,850,765. The amounts of the total bank balances are classified into four categories of custodial credit risk: Category 1 - Cash that is insured (e.g., Federal Deposit Insurance) or collateralized with securities held by the School District or by the School District's agent in the School District's name. Category 2 - Cash collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name. Category 3 - Cash collateralized with securities held by the pledging financial institution, or by its trust department or agent but not in the School District's name. Category 4 - Uncollateralized. - 16 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 3: DEPOSITS AND INVESTMENTS The School District's deposits are classified by custodial credit risk category at June 30, 2006, as follows: Custodial Credit Risk Category Bank Balance 1 $ 362,665 2 1,488,100 3 0 4 0 Total $ 1,850.765 CATEGORIZATION OF INVESTMENTS At June 30, 2006, the fair value of the School District's total investments was $1,773,721 and this entire amount consists of U.S. Treasury Money Market Mutual Funds (open-end mutual funds) which are not required to be classified by categories of custodial credit risk. Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value ofan investment. The School District does not have a formal policy for managing interest rate risk. At June 30, 2006, the School District's investment consisted of U. S. Treasury Money Market Mutual Funds (open-end) which had an investment maturity of less than one year. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk. The U.S. Treasury Money Market Mutual Funds have a credit quality rating of AAA by Moody's and Standard and Poor's. Note 4: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 - Inventories Note 5: CAPITAL ASSETS The following is a summary of changes in the Capital Assets during the fiscal year: - 17 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 5: CAPITAL ASSETS Balances July 1, 2005 (Restated) Increases Decreases Balances June 30, 2006 Governmental Activities Capital Assets, Not Being Depreciated: Land $ 1,036,946 $ 0 $ 0 $ 1 036 946 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements $ 25,770,381 7,239,075 $ 2,311,219 1,376,516 $ $ 25,770,381 310,248 8,305,343 2,311,219 Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 7,004,631 6,004,325 2,207,003 692,849 294,669 5 518 310,248 7,697,480 5,988,746 2,212,521 Total Capital Assets, Being Depreciated, Net $ 20,104,716 $ 383 480 $ 0 $ 20,488,196 Governmental Activity Capital Assets - Net $ 21,141.662 $ 383 480 $ 0 $ 21.525,142 Capital assets being acquired under capital leases as of June 30, 2006, are as follows: Governmental Funds Buildings and Improvements Equipment Less: Accumulated Depreciation $ 1,041,240 1,884,932 1,457,130 $ 1,469,042 Current year depreciation expense by function is as follows: Instruction Support Services School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 766,022 $ 3,466 18,303 194 708 216,477 10 537 $ 993 036 - 18 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 6: RESTRICTED ASSETS Special Purpose Local Option Sales Tax (SPLOST) funds are reported as restricted assets in the Statement of Net Assets because their use is limited by statutory provisions. Restricted assets at June 30, 2006, were as follows: Debt Service Funds Restricted Investments: Debt Services $ 1,773,721 Note 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2006, consisted of the following: Transfer to Transfers From General Fund District-wide Capital Projects $ 1,550,019 Transfers are used to move property tax revenues collected by the General Fund to the District-wide Capital Projects Fund as supplemental funding source for capital construction projects. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God and unemployment compensation. The School District has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District has elected to self-insure for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past three years. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the same fund that the employee's salary and benefits were paid, with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. - 19 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 8: RISK MANAGEMENT Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2005 2006 $ 0 $ 10 857 $ 10 857 $ 0 $ 0 $ 3 480 $ 3 480 $ 0 The School District participates in the Georgia Education Workers' Compensation Trust, a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general insurance coverage. Additional insurance coverage is provided through an agreement by the Trust with the Midwest Employers Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $500,000 loss per occurrence, up to $2,000,000. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent All Employees $ 100,000 $ 100,000 Note 9: SHORT-TERM DEBT The School District obtains temporary loans in advance of property tax collections, depositing the proceeds in its General Fund. This short-term debt is to provide cash for operations until property tax collections are received by the School District. Article IX, Section V, Paragraph V of the Constitution ofthe State ofGeorgia limits the aggregate amount of short-term debt to 75 percent of the total gross income from taxes collected in the preceding year and requires all short-term debt to be repaid no later than December 31 of the calendar year in which the debt was incurred. Short-term debt activity for the fiscal year is as follows: Beginning Balance Issued Redeemed Ending Balance Temporary Loans $ 450,000 $1,100.000 $ 1,550.000 $===0 - 20 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 10: LONG-TERM DEBT CAPITAL LEASES The Elbert County Board ofEducation has entered into various lease agreements as lessee for energy management, buses and various equipment. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value ofthe future minimum lease payments as of the date of their inception. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rate Amount General Government - Series 2000 4.9% $ 3,610.000 The changes in Long-Term Debt during the fiscal year ended June 30, 2006, were as follows: Governmental Funds General Capital Obligation Leases Bonds Total Balance July 1, 2005 $ 1,364,596 $ 5,280,000 $ 6,644,596 Additions Capital Leases 262,961 262,961 Deductions Debt Retired 326,163 1,670,000 1,996,163 Balance June 30, 2006 $ 1,301,394 $ 3,610,000 $ 4,911,394 Portion of Long-Term Debt Due within One Year $ 320,365 $ 1,760,000 $ 2,080,365 At June 30, 2006, payments due by fiscal year which includes principal and interest for these items are as follows: - 21 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 10: LONG-TERM DEBT Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 - 2013 Total Principal and Interest Ca11ital Leases Princi11al Interest General Obligation Debt Princi11al Interest $ 320,365 $ 217,817 228,986 213,686 111,616 208,924 60,878 $ 44,760 33,591 22,034 13,192 9489 1,760,000 $ 1,850,000 176,890 90,650 $ 1,301,324 $ 183,944 $ 3,610,Q0Q $ 267,54Q Note 11: SIGNIFICANT COMMITMENTS The following is an analysis ofsignificant outstanding construction or renovation contracts executed by the School District as of June 30, 2006: Project Unearned Executed Contracts New Roof - Blackwell Elementary $===='4='='79-,6==6==0 The amount described in this note is not reflected in the basic financial statements. Note 12: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. Note 13: SUBSEQUENT EVENTS In the subsequent fiscal year, on November 7, 2006, voters of Elbert County authorized the continuance of a one percent sales tax (SPLOST) to raise no more than $15,000,000 or to be collected for 20 consecutive quarters, whichever occurs first. The net proceeds from this one percent sales tax will be used for (i) adding to, renovating, repairing, improving, equipping and furnishing existing school buildings and other facilities, including but limited to, athletic/physical education facilities, transportation and maintenance facilities, additional classrooms and parking areas, (ii) purchasing HVAC mechanical systems and roofing, (iii) acquiring system-wide technology and safety equipment, (iv) acquiring textbooks, (v) acquiring school buses and other school vehicles, and (vi) the acquiring of any property, both real and personal, necessary or desirable therefore. -22 - ELBERT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2006 EXHIBIT "I" Note 14: RELATED PARTY TRANSACTIONS Mr. Phil Pitts, Chief Financial Officer for the Elbert County School District, also serves on the Board of Directors for the Elberton Federal Savings and Loan. During fiscal year 2006, Elberton Federal Savings and Loan was one of the institutions that were sent a "Request for Proposal" for a line of credit to benefit the Elbert County School District. The Elberton Federal Savings and Loan institution did not loan funds or provide a line ofcredit to the School District during fiscal year 2006. Mr. Bob Thomas, Chairman of the Elbert County Board of Education during fiscal year 2006, was also appointed to serve as the full time County Administrator for the Elbert County Government. During fiscal year 2006, there were no management actions or financial decisions between the local county government and the local School District that required Mr. Thomas to abstain from voting. Note 15: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) TRS PLAN DESCRIPTION Substantially all teachers, administrative and clerical personnel employed by local school systems are covered by the Teachers Retirement System of Georgia (TRS), which is a cost-sharing multiple employer defined benefit pension plan. TRS provides service retirement, disability retirement and survivors benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. TRS CONTRIBUTIONS REQUIRED AND MADE Employees ofthe School District who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. The School District makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. The required employer contribution rate is 9.24% and employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2006 2005 2004 100% 100% 100% $ 1,607,185 $ 1,540,811 $ 1,529,275 - 23 - (This page left intentionally blank) ELBERT COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2006 SCHEDULE "1" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Enterprise Operations Community Services Food Services Operation Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES {USES} Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS $ 7,570,647 $ 7,570,647 $ 7,428,411 65,000 65,000 282,953 18,765,126 17,908,842 18,658,004 4,097,315 2,589,885 3,737,218 546,995 543,495 1,423,161 4,500 4,500 22,274 53 900 57 400 944 676 $ 31,103,483 $ 28,739,769 $ 32,496,697 $ 19,730,048 $ 18,397,756 $ 19,723,365 1,110,338 1,344,152 695,188 407,510 1,955,785 290,056 2,436,580 1,349,371 121,265 1,715,221 80 574 938,432 811,818 687,419 314,598 1,922,781 290,056 2,086,580 1,334,431 76,660 1,714,575 80 574 1,011,327 1,219,203 718,312 365,809 1,982,203 213,653 2,722,888 1,369,597 114,808 588,065 14,967 1,902,462 391 770 $ 31,236,088 $ 28,655,680 $ 32,338,429 $ -132 605 $ 84 089 $ 158 268 $ 262,961 -1550019 $ -1,287,058 $ -132,605 $ 84,089 $ -1,128,790 1,600,472 1,567,943 1,465,151 11 852 59 736 $ 1479719 $ 1 711 768 $ 336 361 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 25 - ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2006 SCHEDULE "2" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Donation (1) Total U.S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Pass-Through From Georgia Department of Education Comprehensive School Reform Demonstration English Language Acquisition Grants Enhancing Education Through Technology Program Improving Teacher Quality State Grants Safe and Drug-Free Schools and Communities State Grants for Innovative Programs Title I Grants to Local Educational Agencies Vocational Education - Basic Grants to States Total U. S. Department of Education Transportation, U. S. Department of Pass-Through From Department of Public Safety State and Community Highway Safety Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD * 10.553 * 10.555 NIA N/A $ $ (2) 1 719 107 (2) 1,719,107 10.550 NIA 92 913 $ _ _---:..1,L.:.8.:..:12:..,0:a=2=0 84.027 84.173 * 84.332 84.365 84.318 84.367 84.186 84.298 * 84.010 84.048 NIA $ NIA $ N/A N/A N/A NIA NIA NIA NIA N/A $ 690,538 30086 720,624 350,216 10,999 16,951 196,268 17,784 12,672 1,022,939 56894 2,405,347 20.600 NIA $ 433 $ _ _ __,7..;:;5.L;:5;.:a.99~ Total Federal Financial Assistance N/A = Not Available $ ===4.,.,2=9=3=,3=99= Notes to the Schedule of Expenditures of Federal Awards (1) The amount shown for the Food Donation Program represents the Federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the School District during the current fiscal year. (2) Expenditures for the funds earned on the Summer Seamless Program (CFDA 10.555) ($1,650) and the School Breakfast Program (CFDA 10.553) ($323,799) were not maintained separately and are included in the 2006 National School Lunch Program. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Elbert County Board of Education and is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 26 - ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2006 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category I Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Regular Bus Replacement Sparsity Nursing Services Principal Supplements Vocational Supervisors Mid-term Adjustment Hold-Harmless Education Equalization Funding Grant Food Services Vocational Education Austerity Reduction Other State Programs National Teacher Certification Preschool Handicapped Program Statewide K-8 Reading and Math See notes to the basic financial statements. -27 - SCHEDULE "3" GOVERNMENTAL FUND TYPE GENERAL FUND $ 618,107 822,678 492,482 2,117,240 464,263 1,039,871 222,872 2,158,959 1,817,772 724,567 69,897 467,340 850,047 245,573 177,604 484,984 -8,852 174,132 71,244 335,269 108,764 66,051 490,939 836,826 916,125 616,886 101,315 20,000 78,771 11,969 9,092 246,574 2,431,736 104,768 62,607 -890,097 4,883 40,379 54 367 $ ===1=8=,6=5=-8=,0=04= (This page left intentionally blank) ELBERT COUNTY BOARD OF EDUCATION GENERAL FUND- QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM YEAR ENDED JUNE 30, 2006 SCHEDULE "4" DESCRIPTION ALLOTMENTS FROM GEORGIA DEPARTMENT OF EDUCATION (1) (2) ELIGIBLE QBE PROGRAM COSTS SALARIES OPERATIONS TOTAL Direct Instructional Programs Kindergarten Program $ Kindergarten Program-Early Intervention Program Primary Grades (1-3) Program Primary Grades-Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades-Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Category II Category Ill Category IV Category V Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) 919,392 $ 550,397 2,373,740 549,798 1,165,001 291,292 2,434,653 2,052,811 823,393 2,030,184 555,505 3,987 197,046 84 369 1,253,085 $ 364,172 2,742,753 612,863 1,786,754 419,761 2,777,356 2,372,560 918,508 706,728 1,142,581 220,857 40,855 551,540 4,846 230,614 196 957 11,289 $ 3,754 28,982 6,325 44,602 4,060 47,864 151,066 60,359 6 11,828 589 14 1,264,374 367,926 2,771,735 619,188 1,831,356 423,821 2,825,220 2,523,626 978,867 706,728 1,142,587 220,857 40,855 563,368 4,846 231,203 196 971 TOTAL DIRECT INSTRUCTIONAL PROGRAMS $ 14,031,568 $ 16,342,790 $ 370,738 $ 16,713,528 Media Center Program Staff and Professional Development 379,341 75 026 636,643 40 000 34,071 35 778 670,714 75 778 TOTAL QBE FORMULA FUNDS $ 14 485 935 $ 17 019 433 $ 440587 $==1=7=4=6=0=0=2=0 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the State budget austerity reduction. See notes to the basic financial statements. - 29 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 29, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Elbert County Board of Education REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Ladies and Gentlemen: We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Elbert County Board of Education as of and for the year ended June 30, 2006, which collectively comprise Elbert County Board of Education's basic financial statements and have issued our report thereon dated January 29, 2007. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered Elbert County Board of Education's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting that, in our judgment, could adversely affect Elbert County Board ofEducation's ability to record, process, summarize and report financial data consistent with assertions ofmanagement in the financial statements. Reportable conditions are described in the accompanying Schedule ofFindings and Questioned Costs as items FS-6521-06-01, FS-6521-06-02, FS-6521-06-05, FS-6521-06-06, FS-6521-06-07, FS-6521-06-08 and FS-6521-0609. 2006YB-40 A material weakness is a reportable condition in which the design or operation ofone or more ofthe internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, of the reportable conditions described above, we consider items FS-6521-06-07 and FS-6521-06-09 to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether Elbert County Board of Education's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the management and members of the Elbert County Board ofEducation and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, RWH:gp 2006YB-40 sell W. Hinton, CPA, CGFM State Auditor Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 29, 2007 Honorable Sonny Perdue, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Elbert County Board of Education REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH 0MB CIRCULAR A-133 Ladies and Gentlemen: Compliance We have audited the compliance of Elbert County Board ofEducation with the types of compliance requirements described in the U.S. Office of Management and Budget (0MB) Circular A-133 Compliance Supplement that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Elbert County Board of Education's major Federal programs are identified in the Summary of Auditor's Results Section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of Elbert County Board of Education's management. Our responsibility is to express an opinion on Elbert County Board of Education's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 0MB Circular A133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and 0MB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the Elbert County Board of Education's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on Elbert County Board ofEducation's compliance with those requirements. 2006SA-30 In our opinion, the Elbert County Board of Education complied, in all material respects, with the requirements referred to above that are applicable to each ofits major Federal programs for the year ended June 30, 2006. Internal Control Over Compliance The management of Elbert County Board of Education is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered Elbert County Board ofEducation's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with 0MB Circular A-133. We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation ofthe internal control over compliance that, in our judgment, could adversely affect the Elbert County Board of Education's ability to administer a major Federal program in accordance with applicable requirements oflaws, regulations, contracts and grants. The reportable condition is described in the accompanying Schedule of Findings and Questioned Costs as item FA-6521-06-01. A material weakness is a reportable condition in which the design or operation of one or more ofthe internal control components does not reduce to a relatively low level ofrisk that noncompliance with the applicable requirements oflaws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major Federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration ofthe internal control over compliance would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe the reportable condition described above is not a material weakness. This report is intended solely for the information and use ofthe management, members ofthe Elbert County Board ofEducation, Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, ~~,~~~c~ State Auditor RWH:gp 2006SA-30 SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS ELBERT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-6521-04-01 FS-6521-04-02 FS-6521-04-03 FS-6521-05-01 FS-6521-05-02 FS-6521-05-03 Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Control Procedures Finding Control Number: FS-6521-05-02 The School District central office and Principals' accounting staffimplemented additional procedures that resolved the separation of duties problems. In regards to inadequate controls, each school has been contacted by the School District Finance Officer with questions and instructions regarding their existing documentation procedures and the changes that should be made. There continues to be communication between the School District Finance Officer and the individual school bookkeepers regarding implementation of these improvements. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Finding Control Number: FS-6521-05-03 The School District Finance Officer invested considerable time working on improving the layout, structure and composition ofthe capital asset records as offiscal year end June 30, 2006. A number ofadjustments and corrections were noted along with a number ofitems that needed to be added to the listing. Additional procedures are being implemented to ensure all additions and retirements are properly valued and recorded during the current fiscal year. - 1- ELBERT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-6521-02-03 FA-6521-02-04 FA-6521-03-02 FA-6521-03-03 Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented CORRECTIVE ACTION/RESPONSES ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized U.S. Department of Education Through Georgia Department of Education CFDA Numbers 84.027 and 84.173 Amount: $6,700 Finding Control Number: FA-6521-02-03 Subsequent to audit fieldwork, the School District was able to compile additional information regarding the time spent by the two employees that received payroll supplements from the Special Education Grant. The employees provided records demonstrating significant time spent on this Federal program. This information is being provided to the State of Georgia Department of Education for a final decision on this finding. ALLOWABLE COSTS/COST PRINCIPLES Time and Attendance Records Not Utilized U.S. Department of Education Through Georgia Department of Education CFDA Numbers 84.027 and 84.173 Amount: $6,700 Finding Control Number: FA-6521-03-02 Subsequent to audit fieldwork, the School District was able to compile additional information regarding the time spent by the two employees that received payroll supplements from the Special Education Grant. The employees provided records demonstrating significant time spent on this Federal program. This information is being provided to the State of Georgia Department of Education for a final decision on this finding. -2- SECTION IV FINDINGS AND QUESTIONED COSTS ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 1. Type of Report Issued on the Financial Statements The auditor's opinion on the Elbert County Board of Education's financial statements was unqualified. 2. Reportable Conditions in Internal Control Disclosed by the Audit of the Financial Statements The audit report for the Elbert County Board of Education disclosed financial statement reportable conditions related to the following control categories. Cash and Cash Equivalents Inventories Revenues/Receivables/Receipts Accounting Controls (Overall) Expenditures/Liabilities/Disbursements General Ledger Capital Assets Budget Preparation/Execution Of the reportable conditions described above, General Ledger and Capital Assets are considered to be material weaknesses. 3. Noncompliance Material to the Financial Statements The audit ofthe Elbert County Board ofEducation disclosed no instances ofnoncompliance that were deemed to be material to the financial statements. 4. Reportable Conditions in Internal Control Over Major Programs The audit report for the Elbert County Board of Education disclosed a reportable condition in internal control over major programs for the following compliance requirement. Procurement and Suspension and Debarment The reportable condition described above is not considered to be a material weakness. 5. Type of Report Issued on Compliance for Major Programs The auditor's opinion on the Elbert County Board of Education's report on compliance with requirements applicable to major programs was unqualified. 6. Audit Findings Required to be Reported by Section .510(a) of 0MB Circular A-133 The Elbert County Board of Education's audit disclosed an audit finding required to be reported by section .510(a) of 0MB Circular A-133. This audit finding is included in section IV of this report. - 1- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 I SUMMARY OF AUDITOR'S RESULTS 7. Major Programs Federal awards audited as major programs are as follows: 10.553 Food Services - School Breakfast Program 10.555 Food Services - National School Lunch Program 84.010 Title I Grants to Local Educational Agencies 84.332 Comprehensive School Reform Demonstration 8. Type "A" Program Dollar Threshold The dollar threshold for type "A" programs was $300,000. 9. Low Risk Auditee The Elbert County Board of Education did not qualify as a low risk auditee as defined by Section .530 ofOMB Circular A-133. II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Reportable Condition Finding Control Number: FS-6521-06-01 Condition: Our examination ofthe School District included a review ofgeneral controls related to its' financial information systems. We noted weaknesses in internal controls which we consider relevant to the School District's financial statements for the fiscal year ended June 30, 2006. Criteria: Policies and procedures should be in place to reasonably mitigate the risk of loss, manipulation or corruption of data due to internal or external threats. Questioned Cost: NIA Information: Weaknesses in internal controls over financial information systems were also identified at the School District. Cause: Management did not implement proper policies or controls over risk assessments, backups and disaster recovery, access to financial information systems and separation of duties. Effect: Without satisfactory controls in place, losses, changes or misuses of data could occur and possibly not be detected. -2- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Reportable Condition Finding Control Number: FS-6521-06-01 Recommendation: Management should perform a complete risk assessment to identify internal and external threats that could cause loss, manipulation or corruption ofdata maintained in the financial information system. Policies and procedures should be developed and implemented to address the weaknesses. BUDGET PREPARATION/EXECUTION Deficit Fund Balance Reportable Condition Finding Control Number: FS-6521-06-02 Condition: Deficit Fund Balance Criteria: Chapter 25 Reporting for LUAs with General Fund Deficit Balances of the Financial Management for Local Units ofAdministration states in part: "The seriousness of fund balance deficits cannot be overstated. The Georgia Department of Education requires those LUAs with deficit balances to meet certain reporting requirements". Questioned Cost: NIA Information: The School District's General Fund (Fund 100) reported a deficit fund balance in the amount of $176,902. Cause: The School District incurred expenditures in excess of revenues during the year under review in the General Fund. Effect: A financial statement irregularity in accordance with O.C.G.A. 20-2-67. Recommendation: The School District should establish policies and procedures designed to ensure that in future periods the School District does not report a deficit fund balance. -3- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Failure to Adopt a Balanced Budget Nonmaterial Noncompliance Finding Control Number: FS-6521-06-03 Condition: School District failed to adopt a balanced budget for the District-wide Capital Projects Fund. Criteria: Chapter 32 Preparing Operating Budgets of the Financial Management for Local Units of Administration states in part: "The budget must be balanced for all budgeted funds. Total anticipated revenues should equal total estimated expenditures. In the event anticipated revenues are insufficient to fund anticipated expenditures, a portion of unreserved fund balance from previous years must be used to fund the shortfall. In the event there is insufficient, unreserved fund balance from previous years to fund anticipated expenditures, then such expenditures must be reduced to equal anticipated revenues plus available fund balance". Questioned Cost: NIA Information: The School District's District-wide Capital Projects Fund budgeted a deficit fund balance in the amount of $1,560,627. Cause: The School District neglected the specific limitations imposed upon the School District by the Georgia Department of Education. Effect: Nonmaterial noncompliance with respect to Chapter 32 of the FMGLUA. Recommendation: Appropriate procedures should be implemented by the School District to ensure that the adopted budget for all budgeted funds is balanced as required. BUDGET PREPARATION/EXECUTION Failure to Comply with Requirements ofO.C.G.A. 20-2-67 Nonmaterial Noncompliance Finding Control Number: FS-6521-06-04 Condition: The Elbert County Board of Education did not comply with provisions of O.C.G.A. 20-2-67. -4- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Failure to Comply with Requirements of O.C.G.A. 20-2-67 Nonmaterial Noncompliance Finding Control Number: FS-6521-06-04 Criteria: Official Code of Georgia Annotated (O.C.G.A.) 20-2-67 Local school system or school subject to corrective action plan for budget deficit; financial operationsform; publication; mailing to Department ofEducation and local governing body, states in part, "(b) ... From the time such irregularity or budget deficit is discovered until the time it is eliminated, the local school superintendent shall present to each member of the local board of education for his or her review and written acknowledgment a monthly report containing all anticipated expenditures by budget function for such school or school system during the current month. The report shall be presented to local board members on or before the tenth business day of each month. Each monthly report shall be signed by each member of that local board and recorded and retained in the minutes of the meeting of the local board of education. (c) Not later than September 30 ofthe year, each local board ofeducation shall cause to be published in the official county organ wherein the local school system is located once a week for two weeks a statement of actual financial operations for such schools or school system identified by the Department ofAudits and Accounts as having financial irregularities...Prior to publication, such form shall be executed by the local board of education and signed by each member of said board and the local school superintendent. (d) A copy ofthe actual financial operations form required to be published by subsection (c) ofthe Code section shall be mailed by each local board of education to the Department of Education and the local county board of commissioners or local municipal governing authority. A current copy of said form shall be maintained on file in the central administrative office of the local school system for public inspection for a period ofat least two years from the date of its publication. Copies of the statement shall be made available on request." Questioned Cost: NIA -5- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS BUDGET PREPARATION/EXECUTION Failure to Comply with Requirements of O.C.G.A. 20-2-67 Nonmaterial Noncompliance Finding Control Number: FS-6521-06-04 Information: The Elbert County Board of Education did not (1) present monthly report containing all anticipated expenditures; (2) publish actual financial operations; and (3) submit actual financial operations to appropriate authorities as required by O.C.G.A. 20-2-67. Cause: Management of the School System did not take appropriate action to meet the reporting requirements specified in O.C.G.A. 20-2-67. Effect: The Elbert County Board of Education did not comply with legal requirements specified in O.C.G.A. 20-2-67. Recommendation: The School System should ensure that procedures are in place to comply with the legal provisions specified in O.C.G.A. 20-2-67. REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6521-06-05 Condition: This is a repeat finding (FS-6521-05-02 and FS-6521-04-02) from the years ended June 30, 2005, and 2004, respectively. The accounting procedures of the School District were insufficient to provide for adequate internal controls over the school activity accounts. Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed according to established procedures. Questioned Cost: NIA -6- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Internal Controls over School Activity Accounts Reportable Condition Finding Control Number: FS-6521-06-05 Information: Revenues/Receivables/Receipts Based on a review of thirty-six items, the following deficiencies were noted: 1) None ofthe receipts were identified by individual receipt number on the general ledger, 2) Twenty receipts had no cash count sheets for cash deposits, and 3) Sixteen receipts did not have receipt documentation attached to and supporting the deposit tickets or the deposit receipts. Expenditures/Liabilities/Disbursements Based upon a review of thirty-six vouchers, the following deficiencies were noted: 1) Twenty vouchers did not include an approved purchase requisition, 2) None of the purchase orders, when used, were pre-numbered, 3) Ten vouchers did not contain an invoice or the invoice did not support the payment information, and 4) Fifteen vouchers did not contain documentation evidencing actual receipt of goods or services. Cause: These deficiencies were a result of management's failure to ensure that internal controls were established, implemented and functioning at the individual school level. Effect: Errors and/or irregularities may not be detected in a timely manner. Recommendation: The School District should revise and monitor controls to provide reasonable assurance that transactions are documented and processed according to established procedures. -7- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS INVENTORIES Failure to Adequately Maintain Inventories Reportable Condition Finding Control Number: FS-6521-06-06 Condition: The School District failed to adequately maintain their inventory balance for the United States Department of Agriculture (U.S.D.A.) donated commodities. Criteria: Chapter 12 Inventory Accounting for Consumable Supplies and Chapter 30 Inventories of the Financial Management for Local Units of Administration indicates that School Districts must properly document and maintain inventory balances so that the independent auditor can give an opinion on the balance reported in the financial statements. Physical inventory counts must be checked against the financial statement balances, at least annually, and adjusted accordingly. Questioned Cost: NIA Information: U.S.D.A. donated commodities financial statement balance was not adjusted to the June 30th physical inventory count as required. This resulted in an overstatement of the balance for this inventory type in the amount of $20,232. Cause: Management failed to comply with the requirements of the Georgia Department of Education regarding accounting for food inventories. Effect: The lack of proper accounting procedures increases the risk of unapproved use or theft of Elbert County School District assets. Recommendation: Appropriate procedures should be implemented by the School District to ensure that the financial statement inventory balances are adjusted to and/or agree with the final physical inventory counts at June 30th. -8- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Incomplete General Ledger/DE046 Financial Report Reportable Condition - Material Weakness Finding Control Number: FS-6521-06-07 Condition: The School District failed to include long-term debt activity and capital asset activity in the DE046 financial report submitted to the Georgia Department of Education. Criteria: Chapter 22 Annual Financial Reporting of the Financial Management for Local Units of Administration indicates that School Districts must prepare their financial statements in accordance with generally accepted accounting principles. Questioned Cost: NIA Information: Capital lease debt activity and capital asset activity were not recorded in the School District's general ledger as required. An audit adjustment was necessary to record capital lease debt of$262,961 and capital asset activity of $4,443,442 in the School District's governmental activities. Cause: Management failed to comply with the requirements of the Georgia Department of Education regarding financial reporting. Effect: The failure ofthe School District to maintain a complete and accurate general ledger can lead to inaccurate internal and external reporting. Recommendation: The School District should implement controls to ensure that Georgia Department ofEducation policies and procedures are followed and establish procedures to ensure that all financial data is properly recorded in the general ledger and reported in the DE046. GENERAL LEDGER Failure to Report the Financial Statements in a Timely Manner Reportable Condition Finding Control Number: FS-6521-06-08 Condition: The School District failed to submit the DE046 financial report to the Georgia Department of Education in a timely manner. -9- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Failure to Report the Financial Statements in a Timely Manner Reportable Condition Finding Control Number: FS-6521-06-08 Criteria: Chapter 1 Introduction to LUA Accounting ofthe Financial Management for Georgia Local Units of Administration indicates that "accounting records must provide meaningful, reliable, accurate and timely information to the many persons and groups with legitimate interests in the financial affairs of an LUA". Questioned Cost: NIA Information: The School District's DE046 financial report was submitted to the Georgia Department of Education on October 12, 2006. Cause: Management failed to comply with the due date of September 30, 2006, as established by the Georgia Department of Education. Effect: The failure ofthe School District to prepare and submit the financial report in a timely manner prohibits legitimate users of the report from being able to have timely access to the financial information provided. Recommendation: The School District should implement controls to ensure that Georgia Department of Education policies and procedures are followed and implement procedures to ensure that the DE046 financial report is submitted in a timely manner. CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition - Material Weakness Finding Control Number: FS-6521-06-09 Condition: This is a repeat finding (FS-6521-05-03 and FS-6521-04-03) from the years ended June 30, 2005, and 2004, respectively. The School District failed to adequately maintain their capital assets listing. Criteria: Chapter 37 Fixed Assets of the Financial Management for Local Units of Administration indicates that School Districts must establish fixed asset policies, define system requirements, implement a fixed asset system and maintain fixed asset inventory records. - 10 - ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Failure to Adequately Maintain Capital Assets Reportable Condition - Material Weakness Finding Control Number: FS-6521-06-09 Questioned Cost: NIA Information: The capital assets listing, as presented to auditors for review, contained the following deficiencies: The capital asset records, originally provided to the auditors, were not the final corrected amounts and a restatement entry of$3,903,423 was required to be made by the auditors to adjust for errors and omissions that had been identified in the Buildings and Building Improvements category, but not corrected, by the entity. Equipment meeting the $5,000 capitalization threshold was not identified on the current year additions listings. This omission resulted in an understatement of $301,215 for the Equipment asset category and required an audit entry to correct. Current year capital leases for Equipment were not identified on the current year additions listing. This omission resulted in an understatement of $262,961 for the Equipment asset category and required an audit entry to correct. Current year depreciation expense for the above mentioned restatement and additions were not properly reflected in the capital asset activity presented for audit. An audit adjustment, increasing current year depreciation expense, was made in the amount of $106,519. Current year deletions totaling $310,248 were not correctly removed from the June 30, 2006, capital assets listing. No reconciliation was presented to tie the capital assets listing to the general ledger. A comparison ofthe general ledger and capital assets listing ending balances for June 30, 2006, identified an overstatement on the general ledger by $1,156,028. Several assets were not properly identified with an individually unique asset ID, description and/or location identifier. Examples include Asset #1002 with a description of "Audit - Additional Leases" or a current year addition with NO Asset ID and a description of "Erate TV Dist., PBX Communication, Etc.". Cause: The School District failed to properly maintain its capital assets records in accordance with the School District's approved capital assets policy and generally accepted accounting principles. - 11 - ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL LEASES Failure to Adequately Maintain Capital Assets Reportable Condition - Material Weakness Finding Control Number: FS-6521-06-09 Effect: The failure ofthe School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, misappropriation ofassets, as well as noncompliance with generally accepted accounting principles. Recommendation: The School District should review its capital assets records and make appropriate adjustments to ensure that the capital assets records conform to the School District's approved capital assets policy and generally accepted accounting principles. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS PROCUREMENT AND SUSPENSION AND DEBARMENT Inadequate Accounting/Internal Control Procedures Reportable Condition U. S. Department of Education Through Georgia Department of Education Comprehensive School Reform Demonstration (CFDA 84.332) Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-6521-06-01 Condition: A review of operating expenditures charged to the Comprehensive School Reform Demonstration Program (CFDA 84.332) and the Title I Grants to Local Educational Agencies (CFDA 84.010) revealed that underlying approval documentation was not being utilized as required by 0MB Circular A-87. Criteria: Provisions of the 0MB Circular A-87, Cost Principles for Determining Allowable Costs, require that costs be "supported by underlying documentation that includes approved purchase orders, receiving reports, vendor invoices and cancelled checks". Questioned Cost: NIA - 12 - ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2006 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS PROCUREMENT AND SUSPENSION AND DEBARMENT Inadequate Accounting/Internal Control Procedures Reportable Condition U.S. Department of Education Through Georgia Department of Education Comprehensive School Reform Demonstration (CFDA 84.332) Title I Grants to Local Educational Agencies (CFDA 84.010) Finding Control Number: FA-6521-06-01 Information: A review of ten vouchers, funded from the Comprehensive School Reform Demonstration (CSR) program, identified the following deficiencies: The School District failed to utilize purchase orders for the purchase ofsupplies funded with CSR program funds. Three vouchers, totaling $6,750, were missing required purchase order documentation. One travel voucher, totaling $2,798, included the named employee's hotel bill and the hotel bills of four other employees. This same voucher also showed that the employee failed to use a state tax-exempt form for the hotel taxes. All ofthe CSR program expenditures identified above were determined to be acceptable program charges. A review of twenty-five vouchers, funded from the Title I Grants to Local Educational Agencies program, identified the following deficiencies: Four vouchers, totaling $18,517, were missing required purchase order documentation. All ofthe Title I program expenditures, identified above, were determined to be acceptable program charges. Cause: Management failed to implement procedures to properly review, approve and maintain expenditure documentation. Effect: Without satisfactory accounting policies and control procedures in place, the School District could place themselves in a position where potential misrepresentation of expenditure activities could occur. Recommendation: The School District should establish procedures and controls to ensure that expenditures are properly reviewed, approved and documented. - 13 - SECTIONV MANAGEMENT'S RESPONSES ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-6521-06-01 We concur with the finding. The School District is currently seeking equipment proposals for a new server to house the accounting programs. Concurrent with its acquisition and installation, there will be procedures set up to test the backup system and its integrity. Procedures for preventing unwarranted access into programs at the workstation level have been put in place. Finding Control Number: FS-6521-06-02 We concur with the finding. As reflected in finding FS-6521-06-03, the School District Capital Projects Fund had an accumulated deficit totaling $1,560,627 from fiscal year 2005. The School District had made significant progress in accumulating a surplus General Fund balance. At the recommendation of the Chief Financial Officer, the Board approved an inter-fund transfer completely eliminating the deficit in the Capital Projects Fund. At the time of the transfer, it was anticipated that the General Fund would have sufficient reserves to cover the deficit. The year end accruals were less favorable than expected with the result that the School District had a $176,902 deficit balance in the General Fund. With the sizable deficit in the Capital Projects Fund eliminated, the District will continue its efforts to reduce expenditures in order to eliminate the $176,902 deficit in the General Fund. Finding Control Number: FS-6521-06-03 We concur with the finding. When the Board authorized a transfer of funds from the General Fund to the Capital Projects Fund to eliminate the deficit, the accounting records were not changed to reflect a change in the budget for this revenue source. The School District has put into place procedures to ensure all budgeted revenues and expenditures are booked appropriately. Finding Control Number: FS-6521-06-04 We concur with the finding. The School District will take steps to comply with the corrective action plan and reporting requirements for school districts with budget deficits. Finding Control Number: FS-6521-06-05 We concur with the finding. The School District Finance Officer has contacted each school regarding additional training and explanations of School District procedures. He will visit each school individually to make sure the appropriate procedures are in place. - 1- ELBERT COUNTY BOARD OF EDUCATION SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2006 Finding Control Number: FS-6521-06-06 We concur with the finding. An examination ofthe General Ledger as ofFebruary 28, 2007, shows that the $20,232 error has not changed and is being carried through the year. The School District Finance Officer will make appropriate adjustments at the end of March 2007. Procedures are also being put in place to compare inventory counts to the general ledger on a monthly basis. Finding Control Number: FS-6521-06-07 We concur with the finding. The School District engaged an outside firm to examine and compile the School District's capital asset inventory. The School District failed to do a timely detailed review ofthe inventory with the result that capital assets were significantly understated. The School District has modified procedures to identify and record all capital assets and capital leases on the School District books in a timely manner. Finding Control Number: FS-6521-06-08 We concur with the finding. The School District has now established written procedures stating what information must be gathered and what processes must be completed so that the DE046 financial report can be filed in a timely manner. Failure to have this documentation and procedures established prior to year end resulted in a significant increase in time to complete all required procedures in order to complete the DE046. Finding Control Number: FS-6521-06-09 We concur with the finding. As noted in FS-6521-06-07, the School District has modified procedures to identify and record all capital assets and capital leases on the School District books in a timely manner. Finding Control Number: FA-6521-06-01 We concur with the finding. The School District Finance Officer is providing information and training to staffinvolved with all areas of federal procurement. Procedures are being put in place to monitor the results of that training. Contact Person: Philip L. Pitts, Finance Director Phone: (706) 213-4052 Fax Number: (706) 283-6674 E-mail Address: ppitts@elbert.kl2.ga.us -2 -